If you’re new to investing in South Africa, you’ll quickly run into two terms that sound similar: unit trusts and ETFs. Both let you pool your money with other investors to buy a diversified portfolio in a single purchase — but they work differently in ways that affect your costs, your flexibility, and your long-term returns.

This comparison breaks down exactly how they differ and helps you decide which is right for you — or whether you should use both.

Disclaimer: I am not a financial advisor. This information is for educational purposes only and should not be considered as financial advice. Always do your own research and consider seeking advice from a qualified financial professional before making any investment decisions.

The quick answer

If you just want the short version: ETFs are cheaper and simpler, and for most South African investors they’re the better core holding. Unit trusts offer professional management and suit people who want a hands-off, actively managed approach and are willing to pay for it. Many investors hold both. The table below summarises the key differences.

Feature	Unit trust	ETF
Management	Actively managed by a fund manager	Tracks an index automatically
Pricing	Once a day, after market close	Live, throughout the trading day
Typical TER	~1–2% per year	~0.10–0.40% per year
How you trade	Buy/redeem via the manager or platform	Buy/sell on the JSE like a share
Minimum investment	Often R500/month	From R5 (fractional)
TFSA eligible	Yes (most funds)	Yes (most ETFs)
Best for	Hands-off, professionally managed investing	Low-cost, DIY, long-term investing

How they’re similar

Before the differences, here’s what unit trusts and ETFs have in common:

• Both are pooled investments. Your money is combined with other investors’ and spread across many underlying assets — shares, bonds, property, or cash.
• Both offer diversification. One purchase gives you exposure to many investments, reducing the risk of any single company or bond sinking your portfolio.
• Both are regulated. Unit trusts fall under CISCA (overseen by the FSCA). ETFs are listed on the JSE and also FSCA-regulated. In both cases, your money is held separately from the fund provider’s own funds.
• Both can be held in a TFSA. Most unit trusts and most JSE-listed ETFs are TFSA-eligible, shielding your returns from tax. See my TFSA guide for the rules.

The 5 key differences

1. Cost — the big one

This is the most important difference and the main reason ETFs have become so popular. An actively managed unit trust typically charges a Total Expense Ratio (TER) of 1–2% per year. A broad-market ETF typically charges 0.10–0.40%. That gap doesn’t sound dramatic, but over 30 years it’s enormous.

Here’s the maths: invest R500,000 at 10% annual growth for 30 years. With a 0.20% ETF fee, you keep roughly 9.8% — your money grows to about R8.4 million. With a 1.5% unit trust fee, you keep 8.5% — your money grows to about R6.1 million. The fee difference alone costs you more than R2 million over three decades. That’s not a typo.

This doesn’t mean unit trusts are always a bad deal — a genuinely skilled manager who consistently beats the index can justify their fee. But globally, most active managers don’t beat their index over long periods once fees are taken into account. So the fee is the first thing to scrutinise.

2. Pricing and liquidity

ETFs trade on the JSE throughout the day, so you see a live price and can buy or sell whenever the market is open. Unit trusts are “forward priced” — the unit price is calculated once a day, after the market closes, based on the fund’s Net Asset Value (NAV). You place an order during the day, but the price you get is set at end of day.

For most long-term investors this doesn’t matter — you’re not trying to trade intraday. But it does mean ETFs are more flexible if you ever need to access your money quickly at a known price.

3. Management style — active vs passive

A unit trust manager actively researches and selects investments, adjusts the portfolio over time, and tries to beat the market. An ETF simply tracks a preset index (like the Top 40 or the S&P 500) — no one is making active decisions about what to hold.

Active management has a potential upside: a skilled manager can outperform, especially in less efficient markets or during volatile periods. The downside: you’re paying for skill that, on average, doesn’t deliver outperformance after fees. Passive investing (ETFs) doesn’t try to beat the market — it aims to be the market, at minimal cost. Over long periods, that simple approach has beaten most active strategies.

4. How you buy and sell

ETFs are bought and sold on the JSE through a brokerage platform (EasyEquities, SatrixNOW, your bank’s trading platform) — exactly like buying a share. You search the code, place an order, and you’re invested. See my guide to buying ETFs in South Africa for the full step-by-step.

Unit trusts are bought directly from the fund manager (Allan Gray, Coronation, Ninety One) or through a platform’s unit trust section. You don’t trade them on an exchange — you invest or redeem units through the manager. Most also support monthly debit orders, which makes them convenient for set-and-forget investing.

5. Minimum investment

ETFs are accessible to almost anyone. On EasyEquities you can buy a fractional ETF from around R5. Unit trusts typically require a higher minimum — often R500/month for a debit order, or a larger lump sum. Neither is out of reach for a regular earner, but ETFs lower the barrier further.

When to choose an ETF

• You want the lowest possible fees.
• You’re comfortable managing your own investments (it’s not hard — see the how-to-buy guide).
• You’re investing for the long term and want market returns, not a bet on a manager’s skill.
• You want flexibility to buy and sell at live prices.
• You’re starting with a small amount.

When to choose a unit trust

• You want a professional making investment decisions for you.
• You prefer a set-and-forget monthly debit order into a managed fund.
• You believe a specific manager or strategy can outperform the index after fees.
• You’re investing in a market segment where active management has a real edge (some argue emerging markets or SA small-caps are less efficient).

Can you hold both?

Yes — and many experienced investors do. A common approach is core-and-satellite: use low-cost ETFs for the bulk (core) of your portfolio to capture market returns cheaply, then add a unit trust or two as satellites where you want active management or a specific strategy the ETFs don’t cover.

For example: 80% of your portfolio in a three-fund ETF portfolio (local equity, global equity, bonds), and 20% in a carefully chosen active unit trust. You get the low-cost base of ETFs with the option of active upside where you think it’s worth paying for.

The bottom line

For most South African investors — especially beginners — ETFs are the better starting point because they’re dramatically cheaper, simple to buy, and deliver market returns without betting on a manager. The fee advantage compounds into hundreds of thousands of rands over a lifetime.

Unit trusts still have a place if you specifically want professional management and are willing to pay for it. The two aren’t mutually exclusive. Whatever you choose, the most important thing is to start investing regularly, keep fees low, and think in decades, not months.

Frequently asked questions

Which is cheaper, a unit trust or an ETF?
An ETF, usually by a wide margin. Broad-market ETFs typically charge 0.10–0.40% per year; actively managed unit trusts charge 1–2%. Over decades, that difference compounds into a large gap in your final returns.

Which is safer?
Neither is inherently “safe” — both rise and fall with the markets they track or invest in. A money market unit trust is lower risk than an equity ETF, and a global equity ETF is lower risk than a single-sector unit trust. Risk depends on what’s inside the fund, not whether it’s an ETF or a unit trust.

Can I hold both in a TFSA?
Yes. Most unit trusts and most JSE-listed ETFs are TFSA-eligible. Your TFSA has a R500,000 lifetime contribution limit, so prioritise your highest-growth, most tax-inefficient assets inside it. See my TFSA guide for details.

Do unit trusts ever beat ETFs?
Yes, some active managers outperform their index in specific years or even over several years. But after fees, most underperform over long periods. The challenge is identifying the winners in advance — which is very hard to do consistently.

I’m a beginner — which should I start with?
An ETF. It’s cheaper, simpler to buy, and gives you market returns without needing to evaluate fund managers. Start with one broad-market ETF on a platform like EasyEquities, set up a monthly debit order, and build from there. See my unit trust guide and ETF explainer for more on each.